Bankrupt FX firm LQD Markets underestimated its client debt by $1.5 million – real amount owed is $3 million

LQD Markets omitted to report debts owing to 143 additional clients to the administrators, and as a result, RSM had to investigate this through third parties such as banks and the company’s prime broker.

Over a year and a month has passed since Liquid Markets (LQD Markets) became a casualty of the extreme and unprecedented volatility which was caused by the Swiss National Bank removing its 1.20 peg on the EURCHF currency pair, and today the Joint Special Administrator, RSM Restructuring Advisory LLP (formerly Baker Tilley), has released a second progress report on the insolvency of the company.

The report, which has been authored by Matthew Robert Haw, Graham Bushby and Matthew Richard Meadly Wild of RSM Restructuring Advisory in Central London, covers the period between August 2, 2015 and February 1, 2016.

LQD Markets, operated by FX entrepreneur Nick Bang, went into insolvency at the end of January 2015 after its exposure to negative client balances as a result of the Swiss black swan event created a situation where its cash position was not recoverable.

Today, the report by the Joint Special Administrators covers the progress so far with regard to the special administration of LQD Markets, the position of the assets which are yet to be realized, the extension of the special administration, the clients and creditors claims and divident prospects as well as the costs and Joint Special Administrators’ remuneration thus far.

The Joint Special Administrators have established that there was a deficit of approximately $2,911,894.60 with regard to client moneies as of January 28, 2015 which is an increase of $1,543,507.31 on the amount which was previously advised by the director.

The increase is due to 143 additional clients that did the company not notify the Joint Special Administrators of, the amount having been discovered as a result of investigations by the Joint Special Administrators.

The FCA has been made aware of the increased deficit.

RSM has stated in its report that in order to fully reconcile the client accounts, it has been necessary for the administrators to obtain third party records including bank statements and schedules from the company’s prime broker.

There is now an investigation in place into how and why the deficit has occurred, and until the investigation into the occurrance of the deficit is complete, the Joint Special Administrators will not be in a position to distribute client funds to such clients.

To date, the Joint Special Administreators have agreed to the claims of 546 clients, totaling $4,342,982.11 and the ability of making claims to the Financial Services Compensation Scheme (FSCS) has not been compromised.

The realizeation of assets has been detailed in today’s report, and on January 28, 2015, the FCA issued a supervisory notice against LQD Markets under the FCA’s client money rules.

This required all of the company’s client money to be notionally pooled. Clients are entitled to a share of the client money pool on a pro-rata basis after deduction of costs.

Thus far, client funds with a sterling equivalent value of £1,388,934,11 have been transferred to the Special Administration accounts.

For the complete report from RSM, Click here.